Saving for home renovations

Renovating your home can make a huge difference to your quality of life, as well as the perceived rental or resale value of your property. However, making major renovations such as fitting a new bathroom or having your rooms repainted can be an expensive business. Unless the renovations are urgent, it works out a lot cheaper if you save the money first, rather than borrowing the necessary funds. This way your money will work for you, earning interest and dividends rather than burdening you with repayments and interest on the loan.

There are lots of ways in which you can save up for home improvements. As a general rule, the more you are prepared to risk, the bigger the potential rewards, but with riskier investments there is always the chance that they will lose value over time rather than gain in value, which could set back your renovation plans.

Perhaps the safest way to save the required sum would be to put away a certain amount every month in a high interest savings account. There is virtually no danger that you will lose any money that you deposit in a savings account, as even if the bank were to go under, your savings would be protected by the Financial Servicies Compensation Scheme.

If you are willing to take more of a risk with your money, you may wish to invest some or all of it in the stock market, via a mutual fund or unit trust. While there is a danger that you will lose money in doing this, over long periods stock market investments have proven, historically, to be the most profitable place to invest your money. However, if you want to get the best out of this type of investment, you will have to do a bit of research to find the most suitable funds, and be prepared to switch at short notice.

Securities, such as corporate and government bonds, tend to offer a halfway house between the unpredictability of the stock market and the reliability of savings. These can be invested in via mutual funds and unit trusts. Bond funds tend to offer higher credit interest rates than savings accounts, and do not fluctuate as wildly as stock market investments, although they can still lose value. Many banks offer a variety of options.